How to Get the Best Price for Your Environmental Services Business in Four Steps
If you own an environmental services company and have been thinking about selling, the financial climate in the United States and growth predictions are prosperous.
As the United States continues to become more sustainable, environmental service businesses are making way for steady growth in the coming years. There has been a significant increase in efforts of becoming “green” across the country and this is due to factors including pollution, global warming, waste disposal, and more. Ever since the enactment of the Clean Air and Water Acts, the founding of green companies has continued to rise significantly. There many different types of environmental services companies that specialize in a variety of assistance and products. The most common types of environmental service companies focus on remediation services, oil recycling, wastewater treatment, waste management, natural resource management and environmental auditing, but there are variations of environmental services companies that may focus on multiple services. IBISWorld predicts that revenue of the environmental services industry will grow at an annualized rate of 1.3% to $510.0 million over the next five years.
If you own an environmental services company and have been thinking about selling, the financial climate in the United States and growth predictions are prosperous. The best time to consider selling your business is when trends are consistent and improving. The first step to selling your environmental services company is to get an accurate business valuation. To give you an idea of which factors are important in valuing an environmental testing company, we have included some formulas below. Keep in mind that these formulas are only a guide and only a professional intermediary or financial analyst can tell you the true value of your business. Pricing tips may vary depending on the type of environmental services company that is being valued. Each environmental services company is unique, and that needs to be considered when determining the price.
- 120% of annual sales includes inventory
- 5X SDE plus inventory
- 5X EBIT
- 5X EBITDA
Now that you have a better understanding of what goes into valuing your environmental services company, you can begin taking steps to ensure you fully maximize the value of your business. If you are planning to sell your business within the next few months or even in the next few years, these steps can help you prepare and ultimately receive the highest sales price possible.
Most environmental services companies require expensive equipment to get the job done. Site remediation service companies that clean up and repair polluted areas use sophisticated machinery, as well as waste management and tank cleaning/removal companies. Large vac trucks and equipment can be costly, so it is important to make sure you already have the machinery in place. To get the highest price for your business, it is necessary to make sure that all your environmental services equipment and machinery are running properly and that they are up to date. Having newer machinery can put you above the competition, making your company more appealing to interested buyers.
TRAINING AND SAFETY MEASURES
Some environmental services businesses require employees to work in dangerous conditions. If your staff is not properly trained, this could result in a serious liability. Ensuring that all of your employees have gone through proper training and that they know all safety precautions is necessary. The last thing you want is to try to value and sell a business that is not properly prepared and that could face legality issues. Having safety regulations and training sessions in place can dramatically increase the sales price of your environmental services company and can give potential buyers a sense of security moving forward.
Buyers of environmental services companies tend to focus on one thing when deciding on acquiring a business and that is the consistency of financial trends and revenue. If long term trends are stable and predictable, this is an indication that your environmental services business is valuable. Green businesses that have a consistent and continuing performance should deliver positive results. Value drivers such as long-term contracts, favorable market positions, and tactful business plan strategies can help increase revenue and set a buyer up for future growth of the company.
Nothing attracts a buyer like a multi-year contract and in the environmental services industry, municipal contracts are superior. Multi-year contracts set your business up for several years of guaranteed revenue and a steady monthly cash flow to help your financials. Contracting with a municipality guarantees a large and reliable client base and stability. Keep in mind that municipal contracts can be difficult to secure, so adding a service such as remediation or recycling can set your company apart.
If you have been contemplating the future of your environmental services business, we hope these four tips have helped you identify ways to boost the value. After all the years of hard work and persistence, you deserve the most for your time and energy. Viking M&A wants to be there to guide you along the way. The economy in the Southeast is exceptional right now, and growing cities such as Charlotte, Asheville, Charleston, Greenville, and Tampa are reeling in buyers looking to expand. If you are thinking about selling your business, the first step is a valuation, which we offer at no cost, no-obligation. Let now be the time to plan for the sale of your business!